ANALYSIS OF BELSNER 4: FAIR COSTS AND LEGAL FICTION : PLUS A USEFUL WEBINAR

The latest development in Belsner v CAM Legal Services Ltd [2022] EWCA Civ 1387 is that the unsuccessful claimant has been ordered to pay £130,000 on account of costs and repay £25,000 that was previously paid to her. However, here I want to look at another part of the judgment. It is important to remember that the Court of Appeal were critical of the way in which the solicitor had given information to their client.  The assessment of the success fee rests (or rested) on a fiction that the costs the solicitors charge will be much higher than the costs that will actually be recovered.

“In future, I hope that solicitors will not suggest CFA or other fee arrangements to their clients that allow for fees that they would not dream of actually charging.”

WEBINAR ON BELSNER: 1st DECEMBER 2022

My colleagues Craig Ralph and Andrew Hogan will consider the significance of the Belsner and Karatysz cases, and the lessons to be drawn going forward in a webinar on the 1st December 2022. Booking details are available here.

THE JUDGMENT IN THE BELSNER CASE

The Court of Appeal found that, as  matter of law, the solicitors were not obliged to obtain informed consent.  The Court, however, was still critical of the solicitor’s explanation in relation to costs.

1. 1. It is clear from what I have already said that I do not think that, as a matter of law, the Solicitors were obliged to obtain the Client’s informed consent to the terms of the CFA on the grounds decided by the judge.

1. 1. It is, nonetheless, appropriate in this test case to explain what the Solicitors in this position ought to have done in order to comply with their professional duties. As I have said, [8.7] of the Code provides that solicitors should ensure that clients receive the best possible information about pricing and the likely overall cost of the matter. [8.6] of the Code provides that solicitors should give clients information in a way they can understand, and ensure they are in a position to make informed decisions about the services they need, how their matter will be handled and the options available.

1. 1. In this case, the Client was given most of the information she needed to make those decisions, with the exception of one vital matter, namely the fixed recoverable costs that the defendant’s insurers would pay within the RTA portal. It would have been straightforward for the Solicitors to inform the Client of the level of the fixed recoverable costs that could be recovered at stages 1 and 2. The Client was told that the Solicitors estimated their base costs at £2,500 (net of VAT and disbursements), and that many such claims would settle within the RTA portal after production of medical evidence and financial losses. She was also given an estimate of £2,000 for her damages. Had she also been told of the level of the fixed recoverable costs, she would have been able to compare the likely recoverable costs with the amount she was being asked to agree to pay the Solicitors. As the Client submitted to us, she would then have known that she was assuming a liability to pay the Solicitors five times the costs she would be getting back from the defendant. I do not think that the Solicitors can be said to have complied with either [8.7] or [8.6] of the Code without providing that information.

1. 1. For these reasons, the Solicitors neither ensured that the Client received the best possible information about the likely overall cost of the case, nor did they ensure that she was in a position to make an informed decision about whether she needed the service they were offering on the terms they were suggesting.

1. In my judgment, it is wholly unsatisfactory for solicitors generally, and these Solicitors in particular, routinely to suggest that their clients agree to a costs regime that allows them to charge significantly more than the claim is known in advance to be likely to be worth. Solicitors do not resolve this unsatisfactory state of affairs by allowing a discretionary reduction of their charges after the case is settled. It would, in theory, be possible for there to be an order made under section 56 of the 1974 Act to deal with this problem, and perhaps some of the others I have identified in relation to current practice, by the establishment of reformed general principles applicable to the determination of the proper remuneration of solicitors in respect of non-contentious business within the pre-action online portals….

1. The Client in this case has never had any real or economic interest in the pursuit of this costly litigation. Only checkmylegalfees.com have such an interest. The Solicitors capped their fees voluntarily at a fair and reasonable level after the event, even if they ought to have told the Client what she would recover by way of fixed costs in the RTA portal, and even if they ought to have agreed in advance when they entered into the CFA to the cap they later applied voluntarily. Mr Ben Williams KC, counsel for the Solicitors, told us in argument that the Solicitors would not have “dreamed” of doing anything other than making a proportionate deduction from the damages as opposed to charging the Client their full base costs and the maximum possible success fee. In future, I hope that solicitors will not suggest CFA or other fee arrangements to their clients that allow for fees that they would not dream of actually charging.